A bulletin sent out by the Transport and General Workers' Union to officials and 30,000 shop stewards, said that a 6 per cent increase would enable members to keep pace with the cost of living.

According to independent researchers, wage rises before last week's tax increases were already beginning to move upwards, albeit only to 3 per cent.

However, expectations are increasing along with signs of recovery. Bill Morris, the T & G's general secretary, argues that rises in tax and the Retail Price Index mean workers are facing a serious pay cut in real terms. He said that VAT on fuel bills, increases in national insurance contributions and the a freeze or cut in tax allowances added up to a 3 per cent drop in pay. With the increase in inflation, a 6 per cent rise was necessary.

In contrast to Mr Morris's calculations, a Reward Group study published today argues that further up the scale, there is unlikely to be a 'wage explosion' in the short term among managers. Increases have averaged 2.8 per cent over the last year, the lowest level recorded in the Reward management pay survey. In the last four months rises have averaged only 2.3 per cent, while Reward predicts increases of about 3.25 per cent over the next 12 months.

Steve Flather, managing director of Reward, claims pay will be held down because inflation is still comparatively low, unemployment high and the Government is keeping a 'firm hand' on public-sector pay rises.